If you have invested your money in US stocks, or want to do so, you may have to know this: Morgan Stanley said the US stock market may fall 10% to 15% by the end of this year. 📉
Oh 😲, why did they say so?
Stocks have had an impressive year so far – the S&P 500 has gained about 21% year-to-date, well above its historical average of 10%. It officially doubled its level from its pandemic closing low (Mar. 2020) late last month – that’s a 100% gain! 🤑
It’s vulnerable! Many credited unprecedented stimulus for this rally. But this also makes stocks pricey. Morgan Stanley believes the markets are priced for perfection and vulnerable as….
- Despite the surging Delta infections, dropped consumer confidence, and the incoming Fed’s tapering, US stocks are still on an upside trend.
- So if any bad surprises strike, the buffer left is very small.
What do other banks think? Do they agree?
#1 Yes 🙋♂️
Goldman Sachs and Citi also released similar warnings, citing risks of high valuation. ⚠️
- Big threats: the spread of the Delta variant, a flagging global growth recovery, or moves by central banks to exit pandemic-era stimulus programs.
Credit Suisse also said it maintains a small underweight on US equities due to extreme valuations and regulatory risk.
#2 No 🙅♀️ more gains ahead
As of late August, other banks like Wells Fargo and UBS said they took upbeat views of the US stocks’ outlook as corporate profits are exploding.
- Wells Fargo thinks the S&P 500 can gain another 8% this year.
What can we do to protect our wealth and investment?
Balance our investment portfolios. Morgan Stanley’s report recommended the below potential winners: 👍
- Stocks in the financial sector, consumer services, consumer staples and health care.
🐿️ Squirrytips: “Successful investing is about managing risk, not avoiding it” – Benjamin Graham (known as the “father of value investing”).